Many consumers are burdened with substantial credit card interest payments. At the same time, they may have balances in their checking accounts which yield little if any interest. The result is that a consumer can be borrowing $1000 for a month from a credit card company at 15% interest, and have $2000 sitting in their checking account yielding 1% interest. This is advantageous for the credit card company that will collect interest on the entire $1000 for the month. It is also advantageous for the bank that holds the checking account, for they get to lend the $2000 at 6%, while paying only 1%. However, it is not in the consumer's best interest. Further, the consumer may have other financial relationships that should significantly reduce any risk that a credit card issuer faces. These other relationships, which ameliorate risk, are generally not considered in fixing rates for the credit card debt.
Also, institutions have to invest large sums in trying to retain consumers and in replacing consumers that close their accounts. Further, institutions tend to compute profitability by account, rather than by consumer. This leads them to emphasize instruments, which may yield high profit (such as credit cards) and therefore to compete with other institutions for this high profit business rather than for the profitability in the entire consumer relationship.
The success of mono-line institutions (e.g. banks that only issue credit cards) is the result of institutions competing instrument by instrument.